At some point, almost every person thinks about investments. In the past few years, cryptocurrencies have risen on the same level as such traditional investment objects as securities, real estate, precious metals, etc. More and more people are paying attention to cryptocurrency as an investment tool. And the crucial question is how to make it safe for everyone.
Is cryptocurrency a safe investment?
It is important to remember that entirely safe investments do not exist. In this regard, cryptocurrency is no exception to the rule. With the right approach, investing in cryptocurrencies or exchanging cryptocurrency can bring good profits, but it is worth considering that certain risks are inherent in the cryptocurrency market. Such as the high volatility of cryptocurrencies, the activities of unscrupulous trading platforms, scammers, etc. At the same time, most of the risks associated with cryptocurrency can be significantly reduced if you follow the basic rules of financial literacy and cybersecurity. To minimize risks, crypto investors need constant monitoring and market research. A critical component is to observe market trends, changes, and news and respond to them without too much panic and emotions.
Are there security risks associated with cryptocurrency?
Like any other financial instrument, cryptocurrencies have their risks. Most of them are directly related to such a term of the cryptocurrency world as high volatility. The value of assets can vary depending on many factors:
- large investments;
- public statements of famous people;
- prohibitions on the circulation of digital assets;
- shortage or excess of necessary equipment.
It is important to note that due to this peculiarity of the market, the value of assets can change in both directions: positive and negative.
Fraudsters are especially active in everything that has to do with finances. Digital assets are no exception, and scammers act in various ways: they create false exchanges, fake projects, tokens that disappear after raising funds, or try to get hold of confidential data to steal funds, etc. However, as mentioned above, following the basic security rules will minimize the risks and help you move toward the goal of making a profit.
The most secure way to trade cryptocurrency
Let’s analyze a couple of strategies for buying and selling cryptocurrencies that traders most commonly use.
Copy trading is a strategy in which a trader copies the trades of other investors. People do it with the help of special software or a signal (it is required to implement it as quickly as possible for the transaction to be effective).
Day trading is when all open trades are completed during the day. Bots and special software are not involved in this strategy. Everything is based on a thorough analysis of the market in short periods for a couple of hours.
Scalping is when short-term orders are formed (no longer than an hour). Scalpers prefer trading on calm markets with limited volatility and taking profits immediately after the traded cryptocurrency has moved in a given direction.
HODLing is one of the most popular trading strategies based on the purchase of a digital asset and its storage for a long time without being tied to the exchange rate volatility. Experienced traders usually use HOLDing. The strategy requires patience because a trader does not know whether his transaction will be profitable in the end.
5 cryptocurrency risks to consider before you invest
Here are five risks you need to consider before buying a cryptocurrency and how to avoid them:
Shitcoins
Most likely, you have already heard about cryptocurrencies that lost their value and left the owners with nothing. In most of these cases, it’s already clear that a currency doesn’t have any value at the time of its creation.
Attention to such assets, usually known as “shitcoins,” is attracted with the help of a loud name and active advertising. The purpose of such “projects” is to deceive inexperienced investors who would hear about an inexpensive cryptocurrency and invest in it without any research. “Experienced investors” artificially increase the asset’s value, attracting newcomers to it, and then withdraw funds, causing the value to collapse.
The most effective protection method against such schemes is good research before buying a particular coin, as well as similar projects and their fate, the reputation of sources advertising it, etc.
Volatility
The most obvious risk when it comes to cryptocurrency is volatility. The value of a coin can change at any time depending on various factors: investments, changes in the price of other coins, events (like COVID-19), statements by public figures, etc. For this reason, there is good advice for investors to keep track of the latest events and regularly check what is happening in the world of cryptocurrencies. At the same time, due to decentralization and independence from central banks or governments, cryptocurrency is practically not affected by external political factors.
Security
Scammers are getting more advanced in all areas related to finance, which is a fact. You can protect your finances from the hands of fraudsters by using all available cybersecurity measures offered by most cryptocurrency exchanges.
Fake crypto exchanges
Most people’s path to cryptocurrency begins with finding a suitable exchange. And you need to beware of scammers at this stage already.
Fake platforms can promise users very nice conditions, low transaction fees, and gifts for creating an account and transactions. It is also not uncommon for scams to use platforms that initially work absolutely fine and then claim to have been hacked and lose users’ assets.
The most effective way to deal with this is to use only well-known exchanges trusted by many users, such as the biggest European crypto exchange WhiteBIT. For a successful investment in cryptocurrency, the desire to profit in a constantly changing market is not enough. Any cryptocurrency investment requires you to analyze the market carefully and consider all the risks.
